Thursday, January 25, 2007
Targeting Competitors Misses the PointPundits love to talk about market share and often assume that Yahoo is targeting Google and vice versa, but that strategy never works. A paper by Wharton marketing professor J. Scott Armstrong shows that focuses on competitors instead of profits is a losing proposition. The paper "Competitor-oriented Objectives: The Myth of Market Share" provide real world and laboratory data proving that market share should not be a company goal.
Companies that established objects aimed at stealing market share actual hurt profitability, according to the study.
"All of the correlations between competitor-oriented objectives and profits were negative, ranging from minus 0.28 to minus 0.73," the study says.
A recent example is Sony and Microsoft, which are going at each other in the console wars, while Nintendo has become the most profitable of the three.
This article is a good reminder that profitability, not bragging rights, is the endgame.
By John Gartner at 06:34 PM | Comments (0)